Pocket of Pain for Young Graduates

Young college grads are taking it on the chin. That's what the new data from the government show—and it's not a pretty sight.

On Tuesday, Aug. 29, the statisticians at the Census Bureau released the latest numbers on income and poverty, for 2005. There were plenty of meaty figures, both good and bad, to chew on. On the good news side, median household income rose by 1.1%, adjusted for inflation, the first such gain since 1999. The poverty rate dipped a bit, from 12.7% to 12.6%.

On the bad news side, real median earnings of full-time workers declined, with the earnings of men dropping to the lowest level since 1997. And income inequality widened a bit, with the top 20% of households getting more than 50% of all the income.

TOUGH SQUEEZE. Perhaps the most distressing figure was one buried deep inside the detailed tables. It turns out that the median earnings of young college grads, adjusted for inflation, fell by an astonishing 3.3% in 2005. That's on top of similar declines in 2004 and 2003. All told, the earnings of young college grads are down by almost 8% since 2002. (For a related chart, see BusinessWeek.com, 8/29/06, "Young College Grads in Free Fall.")

By young college grads, we mean full-time workers between the ages of 25 and 34, with a B.A. but no advanced degree. These are people who first entered the workforce during the past 10 to 12 years, some during the boom, some during the early years of the bust. What they've experienced over the past several years is an unrelenting downdraft in wages, probably the first sustained decline for college grads since the 1970s.

What's more, many of them have also been stuck on the wrong side of the housing boom. Just coming out of college, they didn't have the savings or the income to buy a house. And with home prices rising faster than their incomes, it's been very hard for them to catch up.

There are signs that the market for the latest crop of graduates coming out of college has improved a bit. But for the group just before them, it's a real rough ride.